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Questions -
a) Today you have purchased one tonne of palladium for price S. You are concerned that the price per tonne of palladium is going to fall over the next few months and wish to protect against this eventuality. You decide to use a put option written on palladium, with exercise price S and 3 months to maturity, to deliver this protection. Show analytically how the put option, when held in conjunction with the position in the underlying palladium, helps you achieve your goal. Be clear about how the option premium, p, affects your trading profit.
b) You wish to arrange a forward purchase of 1 unit of some commodity with delivery in 3 months. The spot price of this commodity is £350 per unit and the stated 3-month interest rate is 4%. If the commodity costs £10 per quarter to store (payable at the end of the period), develop an arbitrage argument which allows you to work out the delivery price you should be prepared to pay in 3 months.
c) Consider a firm with assets currently worth $400m. The assets' worth could increase to $520m with probability 20% or decrease to $320m with probability 80% in one year's time. The firm has a debt with face value of $380m maturing at that time. The risk-free rate is equal to 10% per year.
i. What are the firm's debt and equity currently worth?
ii. How would your answers to part i. change if the firm committed to pay a dividend equal to $20m shortly before the debt was maturing?
on january 1 2011 trillini corporation issued 3000000 of 10-year 8 convertible debentures at 102. interest is to be
Arguments and Authorities: Explain the basis for your conclusions above. Include appropriate technical citations with related analysis.
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Harriet and Harry Combs (both 37 years old) are married and both want to contribute to a Roth IRA. In 2012, their AGI is $50,000. Harriet earned $46,000 and Harry earned $4,000. (Leave no cells blank - be certain to enter "0" wherever required. Om..
Dane and Conyers had $39,000 and $109,000, respectively, in their January 1 capital balances. Net income for the year was $175,000.
Determine what amount should be reported on Alpha Company's December 31, 2016 balance sheet as a part of the Unearned Subscriptions Revenue related to the July
padong remanufacturing rebuilds spot welders for manufacturers. the following budgeted cost data for 2006 is available
Milky Way Company had the following balances relating to the defined benefit plan at year-end: What is the prepaid benefit cost at the year-end
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